Financial Terms related to Bonds

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BONDS
Baby bonds

• Are bonds which have denominations less than $1,000 per bond.

Brady bonds

• These are issued in conjunction with defaulted Latin American sovereign debt.
Named after a Treasury secretary, Nicholas Brady. Brady bonds are debt-for-debt
swaps.

• Bonds issued by emerging countries under a debt reduction plan.

Century bonds

• Are securities with a maturity equal to 100years.

Corporate bonds

• Debt obligations issued by corporations.

• Are obligations issued by corporations. They are frequently categorized as follows:

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 Intermediate Corporates,

 Distressed Securities,

 Junk Bonds,

 Long Industrials,

 Tennessee Valley Authority Bonds,

•Utilities. There are other categories and subcategories, such as, financials -bank
and nonbank, foreign, Canadian, Yankee and the list goes on.

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Cushion bonds

• High-coupon bonds that sell at only a moderate premium because they are callable
at a price below that at which a comparable noncallable bond would sell. Cushion
bonds offer considerable downside protection in a falling market.

• High-coupon bonds that sell at only at a moderate premium because they are
callable at a price below that at which a comparable non-callable bond would sell.
Cushion bonds offer considerable downside protection in a falling market.

Dollar bonds

• Municipal revenue bonds for which quotes are given in dollar prices. Not to be
confused with "U.S. Dollar" bonds, a common term of reference in the Eurobond
market.

• Municipal revenue bonds for which quotes are given in dollar prices. Not to be
confused with U.S. Dollar bonds, a common term of reference in the Eurobond
market.

Eurodollar bonds

• Eurobonds denominated in U.S. dollars.

Euroyen bonds
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• Eurobonds denominated in Japanese yen.

Extendible bonds notes

• Bonds with short terms to maturity, typically 1 to 5 years, that can be renewed for a
similar period at the option of the holders.

Floating rate bonds

• bonds where the stated interest rate is adjusted periodically within stated limits in
response to changes in specified money or capital market rates.

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Flower bonds

• Government bonds that are acceptable at par in payment of federal estate taxes
when owned by the decedent at the time of death.

Global bonds

• Bonds that are designed so as to qualify for immediate trading in any domestic
capital market and in the Euromarket.

Hurricane bonds

• Are also Catastrophe Bonds issued to pass on unacceptably high risks to

speculators. In exchange, these speculators may receive potentially greater-than-
market rates of return. These bonds have characteristics comparable to those for
risky Collateralized Obligation tranches.

Income bonds

• Bonds that pay interest only when earnings are available.

• Refer to securities which promise to repay the principal when due. However, these
bonds differ from other bonds in that they promise to pay interest only when it is
earned. This type of bond is verisimilar to many kinds of preferred stock. However,
an advantage can be the tax deductibility of the interest charge when paid versus a
preferred dividend payment. These bonds are sometimes known as Adjustment
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Bonds. The quality of these bonds generally is not as good as investment grade
issues because there is an additional contingency on the payment of interest.

Intermediate corporate bonds

• Are investment grade notes and bonds issued by corporations. The maturities
range between 1 to 10 years. These securities encompass banks, other financial
institutions, and industrial issuers.

International bonds

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• A collective term that refers to global bonds, Eurobonds, and foreign bonds.

Investment grade bonds

• A bond that is assigned a rating in the top four categories by commercial credit
rating companies. For example, S&P classifies investment grade bonds as BBB or
higher, and Moodys' classifies investment grade bonds as Ba or higher. Related:
High-yield bond.

Junk bonds

• Refer to non-investment grade debt securities. Sometimes, these issues are called
high yield securities. These securities have credit ratings below Baa/BBB-.

Long bonds

• Bonds with a long current maturity.

• Bonds with a long current maturity. The long bond is the 30-year U.S. government
bond.

Premium for bonds

• Is the amount of price above par for Mortgage Backed Securities, Corporate
Bonds, and Treasury Bonds. For convertibles, it is the amount that the convertible
security is trading over the converted out value of the underlying instrument.

Principal collateralization bonds

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• These bonds are issued in conjunction with defaulted Latin American Sovereign
debt. The U.S. Government has issued Treasury bonds to collateralize (guarantee)
the principal value of these bonds.

Real return bonds

• Abbreviated RRB. Bonds that adjust the semi-annual coupon payments and the
par value for inflation.

Retractable bonds

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• Bonds that give the bondholder the option to sell the bond back to the issuing
company at par ($1,000) either on a specific date, and every 1 to 5 years thereafter,
or if the firm is acquired, acquires another company, or issues a large amount of
additional debt. Usually carries a lower yield than non-retractable debt of the same
quality.

Scheduled bonds

• Are instruments which are engineered to receive principal payments using

stipulated payment schedules. Generally, the term is used for bonds other than
Planned Amortization Class (PAC) and Targeted Amortization Class (TAC) issues.

Serial bonds

• An issue of bonds of which a certain proportion matures each year.

• A bond issue in which maturities are staggered over a number of years.

• Is an issuance of bonds which have different maturity dates for the principal. Often
these bonds are issued ona year-by-year basis but there can be maturity gaps as
well.

• Corporate bonds arranged so that specified principal amounts become due on

specified dates. Related: term bonds.

Short bonds
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• Bonds with a short current maturity.

• Bonds with short current maturities.

Short dated bonds

• Long-term government bonds that are approaching maturity.

Stocks and bonds hedge funds

• Are combinations which are analogous to Balanced Mutual Funds but, depending
on the underlying charter, can use higher degrees of leverage or derivatives.

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Support bonds

• Are a class of securities that absorb many of the risks of the Planned Amortization
Class structure.

U.s. savings bonds

• Registered, nontransferable securities issued by the U.S. government in amounts

up to $10,000.

Zero or low coupon bonds

• Bonds issued with no (zero) or very low coupon rates and sold at a large discount
from par. Canada Customs and Revenue Agency (CCRA) deems the apparent
capital gains on such bonds as interest income.